AFME is pleased to circulate its Prudential quarterly data report for the fourth quarter of 2024. The report presents the latest data on prudential capital, leverage, and liquidity ratios for European GSIBs, and illustrates the performance of debt and contingent convertible (CoCo) securities issued by European banks.
Among the main findings of this report:
Growth in Key capital and liquidity ratios through 2024:
- The CET1 ratio of European GSIBs finalised Q4 2024 at 14.22%, 9bps above levels observed in Q4 2023.
- The end-point T1 ratio also increased during 2024 (+34bps).
- The leverage ratio of EU banks has reached 4.36% in Q4 2024 (4.2% in Q4 2023).
Increase in Capital and RWA:
- European GSIBs ended the fourth quarter of 2024 with €786.5bn in CET1 capital, a sharp increase of €32.04bn compared to Q4 2023 levels (or 4.2% YoY). The increase was predominantly driven by earnings retention, only partially offset by distributions.
- During 2024, the aggregate RWAs of European GSIBs slightly increased, closing the year at €5,547 billion. This represents a year-on-year increase of 3.9% and a quarter-on-quarter increase of 2.5%.
Focus on Contingent Convertibles (CoCo)
- In 2024, the high yield AT1 CoCo OAS consistently declined, dropping from 3.33% in January to 2.59% in September, falling below pre-March 2023 turbulence levels.
- The weighted average coupon of fixed-rate CoCo instruments in 2024 was 7.34% (8.82% in 2023).
- In 2024, 62% of Tier 1 CoCo instruments issued by European GSIBs had a 7.0% capital trigger, reversing the trend from 2022 and 2023 when most issuances had a 5.125% trigger.
Key proposed changes to the Fundamental Review of the Trading Book
AFME has prepared a brief summary outlining key proposed changes to the Fundamental Review of the Trading Book (FRTB). Our analysis highlights concerns that the Internal Model Approach (IMA) requirements are overly complex, as well as operationally and computationally burdensome. As a result, most banks are expected to rely on the Standardized Approach, which remains insufficiently risk-sensitive.
To ensure a more effective framework, AFME has identified key areas requiring further attention, including:
- Standardized Approach
- Internal Model Approach
- Collective Investment Undertakings
- Operational Relief
